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1 Karmen Chan – Airplane Programs Jonathan Loh – Commercial Sales Berton Lim – Engineering, Operations & Tech. Andy Neo – Finance E 2 - Ensuring Success:

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Presentation on theme: "1 Karmen Chan – Airplane Programs Jonathan Loh – Commercial Sales Berton Lim – Engineering, Operations & Tech. Andy Neo – Finance E 2 - Ensuring Success:"— Presentation transcript:

1 1 Karmen Chan – Airplane Programs Jonathan Loh – Commercial Sales Berton Lim – Engineering, Operations & Tech. Andy Neo – Finance E 2 - Ensuring Success: B787 Enhancing Sustainability

2 The Current Market Outlook 2 Outsourced Manufacturing – Growing Trend Refocusing: High Value, Core Competence Refocusing: High Value, Core Competence Emerging Markets, Emerging Threats Emerging Markets, Emerging Threats Countering Threats, Sustaining Advantage Standards BioFuels, Emissions Standards Exogenous Events Shorter Economic Boom- Bust Cycles

3 E 2 : Ensuring & Enhancing 3 Ensuring Success: B787 Core Competence & Competitive Advantage Enhancing Sustainability Strong New Ecosystem

4 Managing Labor & Vendor Relationships will Deliver the B787 On Time, On Target 4 Ensure Timeliness & Reliability Improved Quality Communicates and convinces customers ?

5 Ensuring Vendor Performance: Tuning-Up & Providing Suppor 5 OBJECTIVES The Boeing Vendor Tune-Up Program Execution Align process & quality standards Continuous improvement in processes Align process & quality standards Continuous improvement in processes Global MoonShine mobile teams Regional Mobile team to support Knowledge sharing Focus groups with MoonShine team Knowledge sharing Focus groups with MoonShine team Every 2 months Periodical refresher courses Every 2 months Periodical refresher courses Ensure

6 Training & Rewarding the NextGen Boeing Workforce 6 Ensure Key concernsRecommendations Competitive compensations Existing formula with periodical changes Long-term incentivization A shift to variable wage- Collective Business Performance Job security Training program: Increase skill sets to perform higher value-adding functions

7 Managing Labor & Vendor Relationships will Deliver the B787 On Time, On Target 7 Ensure Timeliness & Reliability Improved Quality Communicates and convinces customers The Boeing Vendors Tune- Up Program Rewarding and Training NextGen Boeing Workforce

8 E 2 : Ensuring & Enhancing 8 Enhancing Sustainability Ensure Enhance Core Competence & Competitive Advantage Ensuring Success: B787 Strong New Ecosystem

9 Buy-to-Build Ratio: Are we Outsourcing too much? 9 Ensure Enhance

10 Buy-to-Build Ratio: Are we Outsourcing too much? 10 Ensure Enhance Situation: 70% outsourcing down to approximately 60% Situation: 70% outsourcing down to approximately 60% Implication: Built up experience & complex knowledge Implication: Built up experience & complex knowledge Conclusion: Leverage on 787 experience for future Conclusion: Leverage on 787 experience for future 1.Inevitable of the future 1.Establish leadership 1.StarShine to support outsourcing 1.Inevitable of the future 1.Establish leadership 1.StarShine to support outsourcing 1.Result of purchase of Vought 2.Testing commenced 1.Result of purchase of Vought 2.Testing commenced 1.Steep learning curve 1.Leaders in Global Supply Chain Mgmt 1.Steep learning curve 1.Leaders in Global Supply Chain Mgmt

11 Emerging Threats: China at the Top 11 Ensure Enhance

12 Resulting Implications of Threats 12 Ensure Enhance Situation: Economics Influence Outsourcing Situation: Economics Influence Outsourcing Implication: Manufacturing more Overseas - BUT Implication: Manufacturing more Overseas - BUT Solution: Focus on Higher Value Work Solution: Focus on Higher Value Work 1.Outsourcing not for cost 2.Manufacturing less of an advantage tomorrow 1.Outsourcing not for cost 2.Manufacturing less of an advantage tomorrow 1.Financial Risk Reduced 2.Allows Foothold in Key Markets 3.Allows Focus on Core Competency 1.Financial Risk Reduced 2.Allows Foothold in Key Markets 3.Allows Focus on Core Competency 1.Design & Systems Integration 2.Excel in Project Mgmt 3.Making it difficult to replicate 1.Design & Systems Integration 2.Excel in Project Mgmt 3.Making it difficult to replicate

13 With the Threat: Our Core Competencies & Advantages will be: 13 Ensure Enhance Gold Standard in Project ManagementHigher Value WorkFoundation: Innovation

14 Whats next beyond 787? 14 Ensure Enhance Starshine Specialised unit focusing on Project Management Excellence Nanotechnology Enhance aircraft performance through better materials

15 StarShine: Developing Project Management Excellence 15 Ensure Enhance Goals Functions Reach new frontiers in project management Improve programs time-to-market speed Support and collaborate with program teams Ensure good performance in order to reduce developmental delays; keep production schedule on time Starshine

16 Why StarShine? 16 Ensure Enhance Assist, support program teams in project management Share best practices – across industries/internally Good ideas from collaboration between experts Timely delivery of planes, improvements in production processes Improve project management capabilities Attain sustainable competitive advantage that are not easily replicated; create ecosystem of gold standards Engagement Excellence Epitome 1 2 3

17 Nanotechnology 17 Ensure Enhance Nanotechnology Goals Open new frontiers with emerging technology Explore long-term potential of enhancing aircraft performance Source: U.S. Committee on Aeronautics Research and Technology Functions Apply new composite materials to aircraft design Research work with UW Centre of Nanotechnology

18 Why Nanotechnology? 18 Ensure Enhance Relevant to most aircraft components and systems Source: Bax and Willems Consulting Eg: Airframes, windows Better material properties that boost functional performance Added protection during harsh weather conditions Build up collective suite of capabilities from investment Be the leading edge of innovation and material science development Impact Improvement Innovation 1 2 3

19 E 2 : Ensuring & Enhancing 19 Enhancing Sustainability Core Competence & Competitive Advantage Ensuring Success: B787 Ensure Enhance Strong New Ecosystem

20 20 Ensure Enhance Financial Incremental Profit of USD 3.5 Billion Incremental Profit of USD 3.5 Billion Financial Implications with our Recommendations

21 Reaffirmation of Our Strategy with Positive NPV 21 Ensure Enhance Financial NPV USD 3.63 Billion NPV USD 3.63 Billion

22 Financial Assumptions & Justifications 22 Ensure Enhance Financial Valuation Assumptions 15 Year Time Horizon 3 Stage Growth Model CAGR Growth Rate of 12.96%, followed by 6% Terminal Growth Rate of 3% WACC of 10.71% 15 Year Time Horizon 3 Stage Growth Model CAGR Growth Rate of 12.96%, followed by 6% Terminal Growth Rate of 3% WACC of 10.71% Qualitative Assumptions Commercial Airline to be key driver of growth Assumed On Schedule Delivery of the 787 Treating Nanotechnology as a call option Commercial Airline to be key driver of growth Assumed On Schedule Delivery of the 787 Treating Nanotechnology as a call option

23 23 Sensitivity Analysis Identifying the Risks 9, , , , , Ensure Enhance Financial

24 Milestone & Implementation: E 2 : Ensuring & Enhancing 24 Ensure Enhance Financial Milestones ENSURE – Tune-Up & Global MoonShine Program ENSURE – Wage Restructuring ENSURE – Training Program ENHANCE – StarShine Team ENHANCE - Nanotechnology -- Union Negotiations Execute & Quarterly Review -- Due Diligence & Approval -- Planning & Development -- Union Negotiations -- Development & Staffing --Training & Field Trips Execution & Quarterly Review --Training & Field Trips Continuation of PhantomWorks Research & Development Commercial Application for New Products & Variants-- --Training & Field Trips --Training & Field Trips Global Educational Institution Research Tie-Ups Execution & Quarterly Review Execute & Quarterly Review

25 Milestone & Implementation: E 2 : Ensuring & Enhancing 25 Ensure Enhance Financial Milestones ENSURE – Global MoonShine Program ENSURE – Wage Restructuring ENSURE – Training Program ENHANCE – StarShine Team ENHANCE - Nanotechnology Execute & Quarterly Review Execution & Quarterly Review --Training & Field Trips Commercial Application for New Products & Variants Execute & Quarterly Review Execution & Quarterly Review Global Educational Institution Research Tie-Ups --Training & Field Trips --Training & Field Trips

26 E 2 : Ensuring & Enhancing 26 Core Competence & Competitive Advantage Ensure Enhance Financial Milestones Summary Ensuring Success: B787 Stabilize Labor Relations – Satisfaction & Productivity Strengthen Vendor capabilities – Tune-Up Enhancing Sustainability StarShine Program – Gold Standard in Project Mgmt Forever New Frontiers - Nanotechnology Strong New Ecosystem

27 Question & Answer 27

28 Index – Presentation & Supplementary Slides Presentation Slides 1.Current Market OutlookCurrent Market Outlook 2.OverviewOverview 3.Tuning-Up & Providing SupportTuning-Up & Providing Support 4.Training & Rewarding NextGenTraining & Rewarding NextGen 5.Therefore Ensuring Success: B787Therefore Ensuring Success: B787 6.How much are we outsourcingHow much are we outsourcing 7.Implications of outsourcingImplications of outsourcing 8.Emerging Threat Review: ChinaEmerging Threat Review: China 9.Implications of China ThreatImplications of China Threat 10.Our Core Competence & AdvantagesOur Core Competence & Advantages 11.Whats NextWhats Next 12.StarshineStarshine 13.Why Starshine will succeedWhy Starshine will succeed 14.NanotechnolgyNanotechnolgy 15.Why Nanotechnology will succeedWhy Nanotechnology will succeed 16.Pro-forma Net Profit with recommendationsPro-forma Net Profit with recommendations 17.Positive NPVPositive NPV 18.Assumptions & JustificationAssumptions & Justification 19.Sensitivity AnalysisSensitivity Analysis 20.ImplementationImplementation Supplementary Slides 1. Resilience & Customer Centricity Resilience & Customer Centricity 2. Our 787 vendors Our 787 vendors 3. What has been done to fix 787 program What has been done to fix 787 program 4. Surveilance tools Surveilance tools 5. Do we have the right partners? Do we have the right partners? 6. Too much outsourced overseas argument Too much outsourced overseas argument 7. Compensation packages Compensation packages 8. Holistic packages Holistic packages 9. What is Moonshine? What is Moonshine? 10. BioFuels Consideration BioFuels Consideration 11. Why not a SonicCruiser? Why not a SonicCruiser? 12. Outsourcing reasons Outsourcing reasons 13. Why not Backward Integrate with Vendors?? Why not Backward Integrate with Vendors?? 14. Airbus A350XWB v. Boeing B787 specs Airbus A350XWB v. Boeing B787 specs 15. Cargo Market Cargo Market 16. Importance of designing the right plane Importance of designing the right plane 17. Commercial aircraft industry analysis Commercial aircraft industry analysis 18. StarShine Structure StarShine Structure 19. StarShine roles StarShine roles 20. Nanotechnology details Nanotechnology details 21. DCF DCF 22. Pro-Forma Income Statement Pro-Forma Income Statement 23. Delivery Schedule (1) Delivery Schedule 24. WACC Calculations WACC Calculations 25. Cost of Debt Calculations Cost of Debt Calculations 26. Tax rateax rate 27. Boeing brief financial performance Boeing brief financial performance 28. Profit Profit 29. Stability of Boeing Stability of Boeing 30. Opportunity costs assumptions Opportunity costs assumptions 31. Growth rates Growth rates 32. Positive trends for nano Positive trends for nano 28

29 Success with new technologies –First commercial aircraft to be designed entirely on computer via CAD software system from Dassault Systemes & IBM –Success: Physical mock-up of nose section built to verify results of program and was successful –Even wider fuselage cross-section demanded by airlines –Fully flexible interior configurations –Operating costs lower than any B767 Opted for twin-engine configuration given past design successes Largest diameter turbofan engines of any aircraft 29 Resilience to new technologies & Customer-centricity Customer centric Approach

30 Vendors for B787 Project United States Europe Japan/KoreaChina Boeing Charleston (announced as Vought Aircraft Industries) Spirit Aerosystems Inc Hamilton Sundstrand Rockwell Collins Honeywell Goodrich General Electric Moog Inc Toray Industries Fuji Heavy Industries Kawasaki Heavy Industries Mitsubishi Heavy Industries Panasonic Bridgestone Korean Airlines - Aerospace Division Shenyang Aircraft Coporation BHA Aero Composites Manufacturing Hafel Aviation, Harbin Chendu Aircraft Alenia Aeronautica GE Aviation Messier-Dowty Dassault Systèmes Eaton Aerospace Rolls-Royce Thales GKN Aerospace 30

31 What has been done? Virtual collaboration environments supporting development activities by suppliers in multiple countries. –Product lifecycle management software allows for collaboration through design and development phase in performing all engineering tasks and capturing design errors prior to production –RFID and unique identification and maintenance and inspection data conforming to industry standards Surveillance Tools to monitor Ad-hoc, short term quick fixes

32 Surveillance Tools to Monitor Vendors Performance 32 Source:

33 Do we have the right partners? 33 Purpose of outsourcing Spread risk Seek financial resources Lower spending on R&D Gain greater access to new markets Asia Pacific Boeing & Japan Japan responsible for approximately 35% of designing and manufacturing airframe structures for B787 R&D work on new tech for Boeing, including composites for B787 Japanese government subsidy: up to USD$3billion Boeing & China Gain access to new markets: China will be the worlds second largest market for new commercial airplanes with a projected demand for 2,600 aircraft valued at $213 billion over the next 20 years. Source: Boeing Current Market Outlook 2009 Yes, foothold in Asia Pac established, but faced with challenges from individual host countries and Airbus

34 Do we have the right partners? Airbus engages in industrial offset agreements with older Airbus models –More difficulties faced in Japan than in China Boeings involvement in Japan: Establish leadership position in wing design and composite tech Ability to deliver quality products, which is on par with US and European manufacturers Asia Pacific

35 35 Do we have the right partners? However, Supply chain problems attributed to new revolutionary process AND product Same manufacturer for 777 and 787: Vought Aircraft Industries Vendor for 777- Aircraft Structural Components: Nose beams, bulkheads, longerons, edge frames Vendor for 787- Aft Fuselage But, inadequate vendor capabilities to cope with new technology required Boeing had to buy out Voughts share and follow up with changes. Utilizing learning points to refine global supply chain concept Difficult to control lower-tier vendors quality and process Not to backward integrate, but align and standardize process and quality standards throughout entire supplier network Cascade from first-tier vendors Best done with Starshine

36 Too much outsourced overseas? Design Issues Weight Issues Engine Issues Certification Issues Production Issues Travelled Work Lay-up Rates Ramp Up Schedule Issues 36 Parts Shortages Fastener Shortage Travelled Work Conformity and Quality Assurance Issues Configuration Control Shop Floor Control Late Definition Engineering Changes Production Ramp-up Issues Supply Chain problems that ensued

37 Too much outsourced overseas? 1. Assembly work was found to be completed incorrectly only after assemblies reached the final assembly line. Root causes are: Oversight not adequate for the high level of outsourcing in assembly and integration Qualification of low-wage, trained-on-the-job workers that had no previous aerospace experience 2. Significant amount of change engineering work Inadequate supplier capabilities in design, e.g. Vought had no engineering department when selected Oversight not adequate for the high level of outsourcing in detailed design Weight growth and subsequent weight saving changes Producitbility improvements 3. Late Definition Boeing admitted responsibility for a shortfall in wiring shipments Late specification indicated by supplier as root cause 37 EXAMPLE: Travelled Work (Production Issues) A need to implement more stringent selection and due diligence in checking first-tier vendors supplier network for future projects Source: Boeing 787 Lessons Learnt, October 2008, Burkhard Domke, Head of Engineering Intelligence, Airbus

38 Compensation Packages: Learning Points from 2008 Strikes Settlements Estimated $685 million pretax profits lost in the Machinists Strikes first 24 days (Boeings third quarter earnings, 2008) Adding in extra expenses incurred to recover to pre-strike rates of production Paying suppliers for overtime Expedited shipping etc 38 Source: The Seattle Times, Boeing, IAM (http://seattletimes.nwsource.com/html/boeingaerospace/ _machinists28.html) Why Boeing needs to avoid a repeat of 2008 Strikes Leadership at the International Association of Machinists and Aerospace Workers had said Boeing's offer fell short in areas such as job-security commitments, cost of living adjustment rates and medical-plan expenses. Key concerns of workforce

39 39 BEFOREAFTER General Wages Increase Raises of a total 11 percent over the life of the contract. Raises of a total 15 percent over the four years of the contract. Min wageRaised $2.28.Raised $2.28. In addition, recent hires get a supplemental raise to boost them past the entry level for new hires. PensionA basic monthly pension of $70 per year of contract A basic monthly pension of $81 per year of service for the first three years, $83 in the fourth year Lump-sum Bonus The greater of either $2,500 or 6 percent of gross pay including overtime, paid in the first year of the contract. The greater of either $5,000 or 10 percent of gross pay including overtime, paid in the first year of the contract. Company incentive- pay Plan As of 2010: 10 days' extra pay for reaching profit and productivity targets and up to 20 days' pay for exceeding them. Machinists not included Medical Plan changes In the traditional plan with zero monthly premium, out-of-pocket maximums would rise 50 percent for families. Monthly premiums for the HMO plan would drop 24 percent. No increases to employees costs Compensation Packages: Learning Points from 2008 Strikes Settlements

40 Holistic Compensation Kerr (1975) recognized the existence of a divergence of goals and motives among members of the organization which led to non- similar outcomes. Often, subordinates respond to reward systems by displaying behavior they perceive as rewarding. 40 The need for aligned performance and reward cultures with Boeing corporate growth strategies Go further than simply telling workforce, but to genuinely understand why these objectives mattered to the business. Launch compensation program and refine based on workforce's experiences and inputs

41 Boeing: Moonshine Shop A lean manufacturing team that uses fast and inexpensive prototyping to develop and prove a concept, prior to full implementation Purpose: to be creative, to solve problems, be creative with solutions Combined: –Lean manufacturing principles –Cross-disciplinary teamwork –Iterative, prototyping approach to new product and process design –Changes to existing products and processes 41 WHAT IS THE MOONSHINE SHOP? BrainstormingTry-storming

42 Boeing: Moonshine Shop Hay Loader on the Assembly Line The old crane & container process took one day-shift crew of 15 people & one night-shift crew of 15, with a total of 16 hours to install one set of passenger seats Cost and time savings: Took 4 people minutes to install a full set of seats 42 SUCCESS?

43 BioFuels: The Complication of Delivery Relies on cooperation of multiple parties – engine makers, airlines, energy co, aircraft manufacturers, airport operators, regulatory bodies Infrastructure to implement it requires investment and commitment BUT we recognize it diversifies source of fuels, green and responsible 43

44 BioFuels Future is already present – nothing groundbreaking, successful test flights aplenty BUT standards yet to be decided, testing, regulatory approval all in process GTL the most feasible near term alternative conventional fuel – BUT not environmentally friendly Summary: Continue focus on developing and ensuring leadership in 2 nd Gen BioFuels that can be used in aviation 44

45 Why not revive the SonicCruiser? Developed for speed, timeliness, and range Example for a Sydney-NYC Mission, it shaves 3hours per flight in a usual 21hr long flight The range of 9000nm, possibly 10,000 is demanded most premium customers ceteris paribus Cost despite mass production volumes of jetliners will increase from increase fuel consumption % more fuel burn- counter this point in time shorter economic boom-bust cycles make sonic this point in time a risk airlines not willing to take But possible in medium term –Fuel technology for biofuels/alternatives/conventional fuel stablises to some new standard for aviation industry –Material costs for largely composite frame deflated - moore's law –Enough demand from consumers for speed, timeliness, willing to pay for airlines to order 45

46 Reasons for Outsourcing Subsidies in developmental costs flowing from host country governments – indirectly subsidizing the development costs Partnership, alliance, equity alliance with local partners to enable deals to flow through (esp. Japan, China) Manufacturing no longer sustainable competitive advantage Focus is now on systems integration, design and other higher value chain work 46

47 Why not Backward Integration? Integration time of at least 2-3 years disruptive to production focus on 787 Current critical issues resolved, thus enabling testing and certification process to begin Cultural and organization integration issues that will complicate integration Countries like Japan, China have foreign ownership restrictions on local companies 47

48 A350XWB v. B787 48

49 49 Rising Fuel Costs No Customer Volume Yields low due to Competitors Overcapacity Tough Conditions Shine Wears Off Cargo Market Cargo Airline: A Tight Market

50 Importance of building right plane for airline industry 50

51 Commercial Aircraft Industry Analysis 51

52 52 Starshine StarShine Structure Prod Dev (2) SCM (4)Finance (2)Engin (4)Sales (2) BD (2) Commercial Av Service (2) Airplane Prog (2)

53 53 StarShine Tasks Support strategic project processes Offer recommendations on implementation plans Collaborate closely with project directors to help them develop good project proposals Provide assistance & support on the quality assessment, monitoring and evaluation of projects Undertake training programmes to build up skills in project management and capacity building Research latest trends in project management

54 54 Nanotechnology Areas Anti-scratch, anti-glare etc by depositing nanopowder based thin layers onto glass Nanoscale silver particles in filtration systems for higher air quality Corrosion and thermal protection Nanostructured coatings to prevent ice formation Carbon nanofibres proven to reduce the weight of wires by close to 4 times Cost efficiency Avionics and other systems Airframes and components Coatings and paints

55 55 The DCF Valuation Valuation ChartSheet (In USD mil) 2010F2011F2012F2013F2014F2015F2016F2017F2018F2019F2020F2021F2022F2023F2024F Net Profit Plus: Depreciation & Amortization0.00 Minus: Increase in Working Capital0.00 Minus: Capital Expenditure0.00 Operating Cash Flow Terminal Value 9, Discount 10.71% Discounted Cash Flows , NPV3,624.07

56 56 The Pro-Forma Income Statement Prognosis (In USD Mil) Description2010F2011F2012F2013F2014F2015F2016F2017F2018F2019F2020F2021F2022F2023F2024F Revenue Commerical Airplanes32, , , , , , , , , , , , , , , Integrated Defense Systems and Boeing Capital 33, , , , , , , , , , , , , , , Total Revenue66, , , , , , , , , , , , , , , Expenses Cost of Products45, , , , , , , , , , , , , , , Cost of Services8, , , , , , , , , , , , , , , Capital Corp Int Exp Equity in Income General/Admin.3, , , , , , , , , , , , , , , Research/Development4, , , , , , , , , , , , , , , Dispositions0.00 Settlement with US Department0.00 Goodwill Impairment Special Program Penalities Owed to Airlines1, , , , , Total Operating Expense64, , , , , , , , , , , , , , , Operating Profit2, , , , , , , , , , , , , , , Minus Taxes Net Profit1, , , , , , , , , , , , , , ,883.83

57 57 Number of Deliveries for Planes F2011F2012F2013F Matured Planes Model Model Model Model Model Model Total Number of Matured Deliveries Unit Cost of Matured Deliveries New Development Model 787 (Delivered) Orginal Deliveries Cumulative Penalized Planes Number of Penatly Months 12 Penalty 0.5 Total Penalty Incurred ,4641,9682,3762,640 Assumes 6 Planes Each Month Assumes 8 Planes Each Month Assumes 10 Planes Each Month Delivery Schedule(1)

58 58 Number of Deliveries for Planes 2014F2015F2016F2017F2018F2019F2020F2021F2022F2023F2024F Matured Planes Model Model Model Model 757 Model Model Total Number of Matured Deliveries Unit Cost of Matured Deliveries New Development Model 787 (Delivered) Orginal Deliveries Cumulative Penalized Planes Number of Penatly Months12 Penalty0.5 Total Penalty Incurred2,5561, Assumes 12 Planes Each Month The Flight Delivery Schedule(2)

59 59 Calculating the WACC I. Cost of Debt (Kd): Estimated All-In Cost for Company5.88% Effective Tax Rate (a)26.03% Kd = 5.9% * ( %) =4.35% II.Cost of Preferred (Kp): Estimated All-In Cost for Company (b)0.00% No Preferred Debt III. Cost of Equity (Ke): Risk Free Rate (20-year T-Bond Yield)3.40% Source: U.S. Department of Treasury Target Beta (c)1.28 Beta-- Up1.66 Beta-- Down0.90 Market Return8.52% Market Risk Premium (d) = (b) - (a)5.12% Small Stock Premium (e)0.00% Country Risk Premium2.00% ^ Rationale: A latent risk due to High Deficits Target Ke 11.95% IV. Weighted Average Cost of Capital (K): D/V16.33% P/V0.00% E/V83.67% Target WACC 10.71%

60 60 Calculation of the Cost of Debt Corporate Bonds Issued by Boeing Name Maturity Date Amount (In USD Mil) Credit Quality PriceCoupon % Coupon Type (Fixed/Floating) CallableRule 144A Yield to Maturity Boeing Cap 5.8%01/15/ High FixedYesNo2.13 Boeing Cap 4.7%10/27/ High FixedYesNo4.56 Boeing Cap 3.25%10/27/ High FixedYesNo2.96 Boeing 6.875%03/15/ High FixedYesNo5.73 Boeing 3.75%11/20/ High FixedYesNo3.83 Boeing 5.875%02/15/ High FixedYesNo5.76 Boeing 6.125%02/15/ High FixedYesNo6.14 Boeing 8.75%08/15/ High FixedNo 5.16 Mcdonnell Douglas 9.75% 4/1/ High FixedNo 3.9 Boeing 7.95%08/15/ High FixedYesNo5.55 Boeing 6.625%02/15/ High FixedYesNo6.06 Boeing 8.75%09/15/ High FixedNo 6.53 Boeing 7.25% 06/15/ High FixedNo 5.88 Source: Morning Star

61 61 Calculation of the Effective Tax Rate Description Net Income Before Taxes Net Income After Taxes Effective Tax Rate9.12%30.93%33.67%33.57%22.88% Average Effective Tax Rate 26.03% Effective Tax Rate Source: Boeing Annual Reports

62 62 Re-Based Monthly Closing Price: S&P 500 and The Boeing Company Apr-2005 to Mar-2010 Overview of Boeing COMPANY SNAPSHOT Latest 12 Months(31-Mar-2010) Sales ($mm) Last 12 Months 68,281.0 Total Assets ($mm) 62,053.0 Return on Equity % Return on Assets2.31% Current Data(26-Mar-2010) Price $72.59 Shares Outstanding (mm) Market Value ($mm) 54, Price/Earnings Ratio 39.7 Price/Book Value Ratio 25.8 Dividend Yield 2.31% Primary Earnings Per Share (LTM)$1.83 Source: OneSource

63 63 Profitability of Boeing

64 64 Stability of Boeing

65 65 Key Assumption 1: Opportunity Cost of USD 500 Mil a Year Source: The Seattle Times

66 66 Key Assumption 2: Growth Rates Source: Reuters CompanyIndustrySectorS&P 500 Sales (MRQ) vs Qtr. 1 Yr. Ago Sales (TTM) vs TTM 1 Yr. Ago Sales - 5 Yr. Growth Rate GROWTH RATES

67 67 Key Assumption 3: Positive Trends for Nanotechnology Aviation technology takes off Aviation technology takes off Using nanotechnology techniques to improve surfaces, making them resistant to ice accumulation. Margaret Blohm, advanced technology program leader, demonstrated how surfaces could be engineered to resist water and other liquids, making them "superhydrophobic," she said. She is also exploring ways to reduce ice adhesion, potentially preventing ice building on aircraft surfaces. Source: timesunion.com Significant Developments Increased Commercial Testing Increased Filing of Patents A comprehensive worldwide database of consumer products incorporating Nanotechnology has been constructed and is being constantly updated by the Wilson Centers Project on Emerging Nanotechnologies. 3 In the period from March 2006 to May 2007, the number of products listed on the database more than doubled, from 212 to 475 and this growth seems set to continue. Source: Hoizon Scanning Intelligence Group Anti-Icing System Succeeds in Test Conditions One immediate use for Battelles innovative technology is coating unmanned aerial vehicles (UAVs). The vast majority dont have anti- icing systems, which leads to cancelled missionsstudies show about 12 percentor sometimes even a crash after the wings become icy.


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